In the lead-up to the US election, the Baht rose steadily throughout 2024 but saw a significant shift at the end of September. It has since dropped by 7% and appears likely to continue depreciating. So, what happened?
1. Trump Gets Elected
While the US election took place on 5 November, it became apparent in late September that Donald Trump was likely to win. It also emerged that his potential policies would include tariffs that could hurt exports from Thailand and many other countries. These policies, coupled with the uncertainty they create, led to a rush towards safer currencies, increasing the valuation of the USD.
2. Bank of Thailand Intervention
The Bank of Thailand intervened after the Baht’s value rose significantly from July to September. Concerns were raised that a stronger Baht would negatively impact tourism and exports, particularly with the high season approaching.
3. Gold and Oil Prices
Commodities have been unstable due to anticipated changes in global government policies, economic outlooks, and conflicts in the Middle East. These factors have exerted downward pressure on the Baht over the past two months.
What Is the Outlook for the Rest of the Year?
As the Baht continues to weaken against the US dollar, further depreciation seems likely. The Asian Development Bank (ADB) recently lowered its growth forecast for Thailand, citing reduced government spending and weaker exports for the remainder of 2024.
Justin Grossbard from CompareForexBrokers supports this ADB outlook but notes that the situation is more nuanced than a general decline in the Baht. He points out that while the USD is expected to strengthen against all Asian and even European currencies due to protectionist policies, the Baht may actually strengthen against other currencies, such as the Euro (EUR), Australian Dollar (AUD), and Singapore Dollar (SGD). This could create net pressure on Thailand’s tourism and export sectors in the coming months.
For instance, the AUD has weakened by 10% against the Baht over the past three months, presenting a mixed scenario for Thailand’s economic dynamics.
What Options Are Available?
If you are holding significant amounts of Thai Baht and are concerned about further depreciation, there are two primary options:
- Convert to USD: Use services like Wise.com to open a USD wallet, allowing you to transfer THB to USD and hold your funds in a low-fee environment.
- Invest in Commodities: Consider purchasing commodities such as gold, which is traded in US dollars. However, gold prices have declined in November so far, so this option may carry risks.
In summary, holding onto Baht may be a reasonable strategy for now. While it may continue to weaken against the USD, it is expected to remain relatively stable against most other currencies.